Measuring what Matters: Vanity Metrics vs. Actionable Metrics
Hint: All that glitters is not gold
A while ago, a client of mine told me she had seen a drop in traffic since she took over the company. She wanted to know why this had happened, and most importantly how it could be solved. I agreed to help out, and then proceeded to work. However, after diving into the data I noticed something peculiar: I could see that her traffic had not decreased at all. In fact it had increased since her take-over, and not just by little. More traffic was coming in across all channels, every month, most noticeably from social media where her traffic had nearly doubled since last year.
Clearly, she didn’t have a problem with getting traffic. All was happy and well then! Well.. not quite. After digging through the data some more, I had another peculiar discovery: Despite the increase of traffic over the year, the client’s conversion rate and conversion volume had dropped significantly. This basically meant that more visitors were coming in through the site than before, but ultimately they were not becoming customers. The client had been so focused on the traffic that she had not even noticed the steady drop of sales!
This is a perfect example of something called vanity metric. Eric Ries first defined vanity metrics in his landmark book, The Lean Startup defining it as metrics that makes you feel good but doesn’t mean anything to your business. Vanity metrics can be alluring: they might look all glittery and nice on paper but in the end they don’t mean jack shit. As in the example with my client showed, you can have all the traffic in the world, but it doesn’t matter if your visitors are not buying from you. Yes indeed, having a good level of traffic is important, but having the right traffic is even more important. And most important, is to have the right traffic coming in that ultimately converts/buys from you.
Lesson learned: Don’t waste your time maximizing on statistics and numbers that don’t mean anything to the ultimate goal of your business.
How to tell if your metrics matter
With that being said, how can you avoid falling into the trap of the vanity metric, and keep your eyes focused on numbers that actually matter to your business? This is where actionable metrics come into the picture. Actionable metrics are tied to the ultimate goals of your business because they really matter to keep your business alive. What’s more, they are actionable, specific, and provide you with insights of the decisions you should take to make an impact on your business.
According to growth expert *Lars Lofgren, actionable metrics answer the following question:
- How do you gain or lose revenue?
- How do you gain or lose customers?
- What are the key functions and benefits that people are coming to you for?
Typical actionable metrics include but are not limited to conversion volume/rate, customer lifetime value, active subscriptions, average order value, total revenue, login rate (for premium membership sites), new vs.returning customers, return of investment, etc.
Goals above everything
Every business has different priorities and what is an actionable metric for one business might not be for you. Because actionable metrics are tied to your ultimate goals, you need to first ask yourself what your goals are. What do you want to achieve with your website/business and how can you get there? To make your goals specific and clear they should be SMART. A SMART goal is an acronym for the following:
- Specific (simple, sensible, significant).
- Measurable (meaningful, motivating).
- Achievable (agreed, attainable).
- Relevant (reasonable, realistic and resourced, results-based).
- Time bound (time-based, time limited, time/cost limited, timely, time-sensitive).
When you’ve decided your goals, you can start typing them down in a measurement plan. A measurement plan is a document that gives you a clear overview of your top-business objectives translated into metrics and dimensions that you can measure for your website. You can easily make a measurement plan with excel or google sheets and it can look something like this:
After deciding your goals and KPI:s, you consequently type down the metrics that will get you to those goals, i.e. actionable metrics. For example let’s say your goal is to grow revenue. Actionable metrics tied to this revenue could then be transactions, net profit, and average order value. Or maybe your objective is to keep your customers. Actionable metrics tied to this could be customer lifetime value, and return visitors.
When this is done you are ready to begin working with your actionable metrics. Just make sure you have your most important goals implemented in your web analytics tool, such as Google Analytics. Decide how often you will measure these goals (weekly, monthly, quarterly, annually) and then you’re good to go.
Final words
Don’t waste your time watching stuff that makes you feel good but doesn’t tell you anything about your business. Companies that get caught up in vanity metrics can get a false sense of success which can hurt the business in the long run. Invest your energy in collecting metrics that help you make valuable decisions.
This article was originally published on my blog. For more reading check out my blog page www.tashina.se/blog/
